How HHS nabbed its biggest fraud case yet

Mar. 17, 2012 - 06:00AM
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Special agents from the HHS Office of Inspector General recover wheelchairs that weren't needed by Medicare beneficiaries. (Office of Inspector General, Health and Human Serv)

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Federal fraud investigators did a double take last year when they unearthed this juicy morsel: Dr. Jacques Roy, a Dallas physician, referred more than 5,000 Medicare beneficiaries for home health care services in 2010, a year in which doctors averaged about 100.

That information helped lead to Roy's indictment last month on charges of orchestrating a $375 million health care fraud scheme, the largest of its type since a federal crackdown began three years ago, according to the Justice Department.

Roy's number of referrals may seem an obvious alarm bell, but tracking down that fact, while sifting through $2 billion a day in Medicare and Medicaid spending, is another matter.

"I'd say data analysis was crucial in identifying the alleged fraud," said Marc Smolonsky, associate deputy secretary at the Health and Human Services Department. When HHS and Justice teamed up almost three years ago to crack down on heath care fraud, Smolonsky said, "we didn't have the ability do this as effectively as we are doing it now."

He and other health care officials credit that ability as one factor in a string of record recoveries in government health care fraud cases. Last year, those recoveries totaled almost $4.1 billion, up from $2.6 billion in 2009, the Justice Department said in a recent report to Congress.

Roy, who owned an association of health care providers that provided home care, has pleaded not guilty. Because the case is still open, federal law enforcement officials were reluctant to discuss details of their investigation.

But they tout the case as an example of their increasingly sophisticated use of high-tech tools to scour vast quantities of data for anomalies that may point to fraud.

In the health care arena, data analysis is based on a simple premise: Look for "what the outliers are, what looks unusual," Gloria Jarmon, deputy inspector general for audit services at HHS, said earlier this month at a forum on government efforts to reduce improper payments. Investigators keep watch for doctors who submit unusually high numbers of claims, or beneficiaries who receive lots of services, for example.

But the logistics become more complicated in a program that pays millions of claims every day.

New capabilities

When Gary Cantrell began his career as a special agent with the HHS inspector general's office 15 years ago, the government had little direct access to the claims data that detail what health care providers are billing taxpayers.

Back then, federal agencies had to rely on Medicare contractors to supply those records, a process that typically took three months, said Cantrell, now deputy inspector general for investigations.

The information was fragmented both by geographic region and by individual Medicare programs, such as the Part B program that pays for doctor visits.

"We had very little visibility across the country — across the programs even — to be able to see the scope of a potential problem," he said.

That has changed, he said, particularly in the last three years. Agents now can scour most Medicare claims data by provider name and other categories on a standard-issue government laptop.

Gaps remain: Records from the Medicare Part C program, which provides coverage through private insurers, are still not combined nationally, for example.

But overall, investigators have access to the bigger picture and can better target hot spots of suspect activity.

Under a 2007 initiative between Justice and HHS, nine cities now have Medicare Fraud Strike Force teams. One is in Baton Rouge, La., where a doctor and a medical equipment supplier drew federal prison terms last year after pleading guilty to fraudulently billing Medicare for about $775,000, mainly for power wheelchairs and other medical supplies that beneficiaries didn't need.

Power wheelchairs, which cost about $5,000 apiece, are generally intended for people weighing at least 285 pounds. In this case, Cantrell said, the starting point of the investigation was a data dive that showed a suspiciously high number of wheelchair billings for the equipment supplier. Also reflected in the records were the names of the prescribing doctor and patients supposedly receiving the equipment.

After talking to those patients, Cantrell said, it was obvious that they didn't need the wheelchairs. The two defendants were also ordered to pay more than $300,000 in restitution, the Justice Department said in a news release at the time. In the Baton Rouge area, the dollar volume of power wheelchair billings to Medicare dropped by about two-thirds from 2008 through late last year, according to IG figures.

Charges against Roy

But in the cat-and-mouse maneuvering between scam artists and law enforcement, the charges in the Roy indictment suggest how brazen some providers can be.

Between 2006 and 2011, Roy allegedly certified more than 11,000 patients for Medicare-covered home health services. No other medical practice in the country had more, the indictment says.

Once his firm, known as Medistat Group Associates, certified beneficiaries as eligible for Medicare, participating home health agencies would bill the government for unnecessary services. Prosecutors have charged a half-dozen other people in the alleged scam; one defendant went so far as to recruit beneficiaries at a Dallas homeless shelter, according to the indictment.

When alarmed Medicare officials cut off reimbursements to Medistat last June, most of the company's employees kept on billing the government using another firm's provider number, according to the Justice Department.

In all, Roy and the other defendants are charged with making more than $350 million in bogus billings to Medicare and some $24 million in fraudulent claims to Medicaid.

Federal officials have not discussed how Roy managed to get away with the alleged abuse as long as he did. But in announcing the indictment, HHS Deputy Secretary Bill Corr said last month that new fraud-detection tools can spot "the kind of sophisticated fraud scheme that previously could have escaped scrutiny."